RF's Financial News

RF's Financial News

Sunday, January 13, 2013

This Week in Barrons - 1-13-13

This Week in Barrons – 1-13-2013

Gun Wars

The President has selected Joe Biden to form a task force charged with doing
something substantial about gun violence in this country. That has spawned vocal discourse from everyone
including: Piers Morgan calling us lunatics for not outlawing guns, to a recent
Marine writing to Maxine Waters: "I will not be disarmed". I am
afraid that this could really blossom into something ugly. The lines are being drawn in the sand. I personally know of folks that haven't so
much as broken a speed limit, yet they will lie under oath if someone asks if
they have firearms in the home. That is
how dramatic this situation has become.

In terms of Constitutional
rights, in many scholarly opinions – the 2nd Amendment of the Constitution
has nothing to do with hunting rifles,
or being able to defend your home. It is
written to allow a populace to defend themselves against a Government run amok. The scholars then connect the dots and say
this gives the American people the right to be armed as well as your
Government’s troops. The argument then
goes: “Let’s not get carried away, how about just allowing the American people
to be armed as well as the drug cartels.”
And the end result of both of these arguments is that automatic, assault
rifles like the AR-15 and 30 round magazine clip should be available for
purchase by John Q. Public.

One item that everyone brings up is that there is too much violence, and if we
got rid of assault rifles the violence would go away. Factually, according to the FBI in 2011 there
were:

-1,694 murders by ‘cutting
instruments’ such as knives,

-1,659
murders by ‘blunt objects’ such as clubs and hammers,

-728
murders by ‘personal weapons’ such as fists, hands and feet, and

-323
murders by ‘rifles’ (including automatic, assault, etc.).

BUT, in 2011 there were 6,220
murders committed by hand guns! Ouch.

I think it’s the hypocrisy that bothers me more than anything else. The
politicians pushing for gun control all have either gun permits to carry, or
armed guards for their family. I was
watching NBC’s Meet the Press (hosted by David Gregory) interviewing the
President of the NRA (disparaging guns, and how people don't need them), yet in
a discourse we find that David sends his children to a school that’s guarded
daily by a dozen armed guards.

Many of us look to other countries and notice that they have much stricter gun
control laws and their violent crime rates are much lower than ours. Unfortunately, no country on earth has had a
history of gun ownership like the US. England
as early as the 30's was banning as many guns as possible, while the U.S. was
encouraging gun ownership. Back in 1996,
after a horrible mass shooting, the Australian Government decided to do one of
the biggest "forced buy backs" of all time. Rifles, shotguns, handguns of all shapes and
sizes were to be turned into the police for a "fair price". There were 681,000 guns turned in – about as many
as are registered in Newark, NJ alone.
The magnitude of the U.S. problem is almost a factor of 1,000
higher. Estimates are that a program
like the Australian ‘forced buy back’ (if declared in the U.S.), would draw in approximately
50 Million guns. That would leave
approximately 250 Million still in circulation.
At this point it’s truly the magnitude of the problem that is tough to
get anyone’s arms around.

We (the U.S.) have a 200+ year history of gun ownership, and over 300 million
guns in circulation. So (on average)
there are as many guns in circulation as there are people. Some of these guns are in the hands of
lunatic psychopaths, and many in the hands of local gangs and drug dealers. Unfortunately I don’t see a way to legislate
this into anything more than: (a) increasing background checks, and (b) closing
the current purchasing loopholes that exist with gun shows.

You can't legislate morality, so politicians go for the symptoms like guns for
the dramatic effect. Transforming America is going to take a lot more
time and a change in mind-set, and potentially will not go well for a lot of traditional
Americans.

The Market....

So far, the market is doing
what I figured it would do – slowly, creeping up to challenge the recent
"highs".

The S&P has already gotten
over the 1470 level and has its eyes set on 1475. The DOW is just 140 points
from challenging the triple top high at the 13,600 level. My suspicion for months has been that if we
got a fiscal cliff deal, we'd be challenging these highs. Well, we got a form of a deal, and sure enough
we're challenging the highs.

I had purchased some SPY contracts
several weeks back in anticipation of this very move. I got in at the 141 level, and saw the SPY
close out Friday at 147 and change. That's
an impressive move for a basket of stocks in a matter of weeks, but I’m thinking
that there is more to come. Again, I’m
looking for the S&P to challenge 1475 and the DOW to challenge 13,640. I tend to think that the first attempt at
going over these levels gets pushed back, and we see a 2 or 3 % pull back
before they quickly try again. But yes,
at some point I feel we break free and run to challenge the all time highs.

So, the feeling here has been
"lean long" and take some profits along the way. This past week we
sold our stakes in: Goldman Sachs (in at 128 – out at 136), and RGR, SWHC, NTFX, LNKD, CLF, AUY all for
nice profits. We even dove in and out of
TRIP (during the week) for a nice profit as well. FYI - my yardstick is 8%. Meaning, that if you can make 8% on a trade,
I often cash in half and leave the remaining half in play.

The chart below shows our
deficits far outpacing our revenues. Fair
warning, this is setting up for one heck of a fight in Congress over Fiscal
Cliff Part 2.

In any event, I’m still
remaining confident.I’m currently carrying
some HD, MS, (see below) and I think there is a bit more upside to this market before
the resistances start to show some force. That said, I will not be afraid to take profits
and then reload on any pushdown.

Tips:

My current short-term holds are:

-HD – in at 61.53 (currently 63.62) – stop at
61.60

-MS in at 18.50 (currently 20.12) – stop at
19.00

-SPY in at 141.97 (currently 147.10) – stop at
143.00

-SIL – in at 24.51 (currently 22.41) – no stop
yet

-GLD (ETF for Gold) – in at 158.28, (currently
160.80) – no stop ($1,660.00 per physical ounce), AND

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Until next week – be safe.

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